Nasdaq is looking to benefit from a strong year for Chinese tech companies launching initial public offerings.
Last week, two Chinese companies debuted on the tech-heavy U.S. exchange, and several more are set to join the IPO wave soon. Chinese social commerce company Yunji closed 29% higher than its listing price on Friday, raising $121 million, and So-Young, a Beijing-based online marketplace for plastic surgery services, raised $179.4 million. The latter soared 31.88% on its IPO day and surged another 14% on Friday.
"It seems like we will have over 40 IPOs from China, [which] are coming to the U.S. this year. So [2019] could be the strongest year ever," said Bob McCooey, chairman of Nasdaq Asia-Pacific.
Other notable names, including Futu and Up Fintech, join Yunji and So-Young to amount to 12 Asia-Pacific companies that have listed on the Nasdaq so far this year. In total, those firms have raised $777 million at their debuts — that compares to the $9.6 billion raised by a total of 53 global IPOs on the Nasdaq as of May 3.
Lesser-known names, but more companies
The U.S. has seen several big-name companies go public this year — such as Lyft, Pinterest and Dropbox — and Wall Street is getting ready for Uber, which is seeking to raise $9 billion. Meanwhile, Chinese privately held start-ups coming to the U.S., unlike last year, are relatively lesser-known and tend to choose downsized listings.
In 2018, iQiyi, China's most popular Netflix-like streaming service, raised $2.4 billion; Pinduoduo, a Chinese online group discounter, raised $1.6 billion; Shanghai-based NIO, an electric vehicle maker, raised $1.15 billion; and music streaming platform Tencent Music raked in nearly $1.1 billion.
This year so far, some of the biggest Chinese tech start-ups, such as Didi Chuxing, Ant Financial and ByteDance, have remained quiet. However, less capital sought by lesser-known names does not necessarily mean that 2019 will be a weaker year for China's tech IPOs on the Nasdaq, according to McCooey.
I think the pipeline for IPOs to the U.S. remains as strong, it's even stronger than it's ever been.Bob McCooeychairman of Nasdaq Asia-Pacific
"Last year was very much capital intensive," said McCooey. "I think that the capital raised may not be as strong this year, but the number of companies coming to market in the U.S. from China will be equally if not more than last year. "
Another notable name is Luckin Coffee, a competitor to Starbucks in China. The Beijing-based coffee chain is reportedly seeking to raise between $500 million and $800 million with a valuation between $4 billion and $5 billion, according to Reuters. Meanwhile, Chinese live streaming platform Douyu is also planning to raise $500 million on the New York Stock Exchange.
Grabbing the tail of the bull
Nasdaq is expecting more Chinese companies to squeeze their listings into this year's already-crowded U.S. IPO scene, trying to take advantage of the longest bull market in American history.
"In general, the markets feel very, very strong," McCooey told CNBC. "The fundamentals are there. The most recent earnings reports by companies indicate that the fundamentals are strong within the market, so I don't think that investors should worry too much — although they should always be diligent."
However, there's some concern that multiple factors could make it more difficult for Nasdaq to win future deals coming from the world's second-biggest economy. Those worries include uncertainty about the future strength of the U.S. stock markets, the strong performance of Chinese exchanges (despite a dip earlier this week), and a new technology-focused board in Shanghai.
China's bid for tech IPOs
Expected to kick off trading as early as June, the Shanghai Stock Exchange's Science and Technology Innovation Board, frequently deemed China's Nasdaq, was first announced by Chinese President Xi Jinping in November last year. It's an effort to keep the country's tech superstars at home and strengthen the capacity of Chinese financial services to serve tech innovation.
The new board's rules, reportedly based on exchanges in the U.S. and Hong Kong, will waive some of China's previous restrictions, such as valuation caps and a ban on unprofitable firms, which made some big names choose overseas venues for listing.
For the Nasdaq, pressure might start to take a toll as Shanghai's new tech board has already shown some early signs of success by receiving 100 IPO applications from Chinese companies as of May 6. Those companies are aiming to raise 98.39 billion yuan ($14.55 billion) in total, according to China's official Xinhua News Agency.
However, McCooey says such pressure presents more of an opportunity than a challenge for the Nasdaq.
"We would welcome opportunities to talk to different exchanges that are growing and might compete with us on the listing side but give us opportunity on the trading side and the regulatory side to be their partners," he told CNBC, noting that Nasdaq is a technology partner for many exchanges.
Despite the challenges from the likes of Shanghai's new board, McCooey said he's still optimistic about Chinese companies continuing to look for American listings.
"As I travel from ... Beijing to Shanghai to Hangzhou to Shenzhen, and I hear the stories of these entrepreneurs and see the businesses that they're growing, I am more encouraged by what is being built in China and what is happening in China than I ever have been," said McCooey.
"I think the pipeline for IPOs to the U.S. remains as strong, it's even stronger than it's ever been," he added.